Local finance infrastructure needs more support to help small charities, says CFG

A report from the Charity Finance Group says there is a big gap between what small charities need and the capacity of accountancy and support providers

Local finance infrastructure needs more support to meet the needs of small charities, a report from the Charity Finance Group has concluded.

The report, which concentrates mainly on the state of small charity accountancy and support service providers, says there is a significant gap between the needs of small charities and the capacity of accountancy and support providers.

The report says that many small charity finance services will struggle to expand to meet growing demand for their services, and the number of accountancy and support service providers has fallen nationally.

There are also challenges in communicating which services are available to small charities and a lack of resources to help small providers keep up to date with developments in complex areas such as tax, the report says.

National bodies could do more, it adds, to meet the needs of these support providers, including promoting better collaboration between them.

The weakest areas for accountancy and support services highlighted in the report are the Midlands, the south east and London, whereas Yorkshire has the strongest area of provision.

The report also highlights skills-based volunteering, digital support and building communication channels to promote services to small charities as ways in which local infrastructure can be helped.

It says ocial investment could be used to help these organisations, recognising the impact they have on the sector while simultaneously realising that it will take time to grow successful business models.

Andrew O’Brien, head of policy and engagement at the CFG, said: “Local infrastructure bodies are the backbone of our sector, providing critical support that enables smaller charities to do their work. The past few years have been challenging for support providers, as it has been for the sector as a whole. But the importance of financial advice and support has never been greater, given the environment in which small charities are operating.

“There are a number of measures that can be taken to support these vital organisations, but it requires a partnership between providers, foundations and government. The CFG will continue to do what we can to help boost the support available to these organisations so that they can, in turn, help small charities to thrive.”

The report was produced as part of the CFG’s small charities programme, which has been supported by funding from the Esmée Fairbairn Foundation.

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Charities ‘must spend more on leadership and infrastructure’, report concludes

The ICAEW report says charities have shied away from making good investment decisions because of a fear that it might negatively affect public perception

A fear of how the public will view investment in charities’ internal infrastructure has led trustees and managers to “shy away from making good decisions”, a new report warns.

The report, Positive Impacts in Challenging Times, published this week by the Institute for Chartered Accountants in England and Wales, says charities must invest more in leadership and infrastructure in order to retain public trust and operate effectively.

“Trustees and management have often shied away from making good investment decisions because they believe that it will impact negatively on how they are perceived,” it says.

“This has resulted in underinvestment in vital areas such as information technology, skills training, income-generating processes and governance and management.”

The report says charities should be prepared to spend more on infrastructure and support functions if it will improve their efficiency and effectiveness.

“Investments in training, evaluation, internal systems and fundraising are important as they enable charities to improve their performance,” it says.

“The risk is that under-investing in infrastructure can actually lead to a deterioration in a charity’s performance and the resilience needed to be able to sustain effective delivery.”

It says charities are to blame for “perpetuating the myth that reduced overheads mean the charity is more effective” and that “this leads to a vicious cycle of underinvestment and the belief that more can be done with less.

“Charities should be ready to make the necessary investment in infrastructure based on what is needed rather than how it may be perceived. Expenditure decisions should be governed by what is in the best interests of achieving objectives effectively, which may require more investment in infrastructure.

It notes that cost ratios of how and where funds are distributed are flawed “in almost all cases” and “lead to inaccurate conclusions”.

The report also says charities should focus more on the selection, induction and training of trustees to ensure they have the correct skills and experience to carry out their roles.

“All trustees should be able to confirm that, before taking up their appointment, they have received sufficient information about the activities of their charity and their role as a trustee, and that they understand the responsibilities that come with being a trustee,” it recommends.

The report says charities should also be more discerning about “unviable” payment-by-results contracts to deliver public services, the report says.

“The practice of winning the contract at any price can be harmful to charities and the causes they serve,” it says.

It says charities are likely to be better off bidding for such contracts as part of a consortium, so participants can be more efficient by sharing logistics and infrastructure. 

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